UAE capital supports US stocks? Not only investing in OpenAI but also pulling Oracle back from the brink of debt
OpenAI is launching a financing plan with a scale of up to $100 billion, with UAE capital expected to play a key role in deep involvement. Previously, OpenAI had received investment from the UAE MGX Fund. This financing initiative not only directly alleviates OpenAI's own funding pressure but also significantly improves the debt outlook of industry chain partners such as Oracle
At a critical moment when the market is worried about the AI bubble bursting, capital from the United Arab Emirates (UAE) may become a key force to turn the situation around.
According to The Wall Street Journal, OpenAI is planning to raise up to $100 billion and is expected to seek investments from UAE sovereign wealth funds. Previously, OpenAI had received investments from the UAE investment company MGX. The report pointed out that UAE sovereign wealth funds (such as MGX) are expected to be the core force in this round of financing.
Market analysis suggests that, given the massive funds already invested, the UAE capital's choice to continue injecting funds at this time reflects, to some extent, the logic of "Too Big To Fail"—extending from the financial institutions of 2008 to today's leading AI companies, capital must continue to be invested to maintain the operation of the system.
For secondary market investors, the significance of this financing goes far beyond OpenAI itself, as it directly relates to the balance sheet health of key suppliers like Oracle. Previously, there were widespread concerns that OpenAI would not generate enough revenue to meet its massive commitments to computing infrastructure from companies like Oracle and CoreWeave. This concern led to Oracle being downgraded by Barclays Bank, with its credit default swap (CDS) prices soaring to a 16-year high of about 156 basis points, and the market even began to price in its bankruptcy risk over the next five years.
This round of financing has a significant uplifting effect on the industry chain. The funds raised by OpenAI will primarily be used to pay for computing costs, which means that data center service providers like Oracle will receive a continuous and stable source of income. As a result, Oracle's stock price rose over 5% in after-hours trading on Thursday.
OpenAI Seeks Government Guarantees
The financing pressure faced by OpenAI began at the end of October this year. On October 31, during a podcast, OpenAI investor Brad Gerstner questioned: how can a company with only $13 billion in revenue afford $1.4 trillion in debt? Sam Altman did not respond directly to this.
A few days later, reports emerged that OpenAI was seeking government guarantees to attract the massive investments needed for AI computing and infrastructure. The potential implications of this news are even more concerning: without government guarantees, OpenAI would be unable to fulfill its $1.4 trillion investment commitments, which also means that the entire AI bubble is about to burst.
Market doubts about the financing capabilities of the AI industry quickly spread to OpenAI's partners. As analysts began to calculate that the AI cycle requires trillions of dollars in debt, the bond and stock prices of companies with weaker credit ratings, such as CoreWeave and Oracle, plummeted, and their likelihood of bankruptcy within five years soared, leading to their credit default swaps (CDS) reaching historical highs
Strategic Bets of Middle Eastern Funds
The deep involvement of the UAE wealth fund is reshaping the industry landscape. According to The Wall Street Journal, given the massive scale of financing, OpenAI plans to bring in the UAE sovereign wealth fund as a key investor. Previously, the company had received funding support from the MGX fund under the UAE artificial intelligence and cloud computing company G42.
Meanwhile, SoftBank Group CEO Masayoshi Son has committed to investing $30 billion in OpenAI this year and sold $5.8 billion worth of Nvidia shares last month to allocate funds for this purpose. OpenAI expects to receive the remaining $22.5 billion from SoftBank's current funding plan by the end of the year. However, facing a total capital demand of up to $1.4 trillion over the next five years, the current financing scale still appears insufficient.
The upcoming $100 billion-level investment is changing the competitive landscape. OpenAI plans to use this funding to support its development over the next two years and even longer, which not only significantly increases OpenAI's chances of ultimately winning in the artificial intelligence competition but also greatly enhances the likelihood of key partners like Oracle and CoreWeave avoiding bankruptcy in the coming years
